When the Pentagon Comes a-Knocking

The California National Guard made news with having to pay back bonuses, but it’s not the only scenario in which the government pays, then asks for reimbursement

Ten years ago, nearly 14,000 California National Guardsmen reenlisted and went to war. As part of their reenlistment, in some cases the Pentagon offered bonuses of $15,000 or more. Men and women signed their names on the dotted line, then flew overseas to active combat zones to defend their country.

Fast forward ten years to October 2016. The Los Angeles Times broke the story that the Pentagon was requiring some of those troops to pay back the bonuses, plus interest for the past 10 years. Then, less than a week after the story went public, the Pentagon announced it was suspending all efforts to collect reimbursement. One month later, in November, California lawmakers in the House and Senate reached a compromise for legislation that would forgive most of the debts.

Although the California National Guardsmen story represented a large number of people and millions of dollars, it isn’t the only scenario in which the Pentagon has demanded reimbursement.

Bomb squad

In January 2015, members of the Pentagon’s bomb squad learned the hazardous pay they had been receiving for eight years was a mistake. Not only was hazardous duty pay immediately stopped, thereby reducing paychecks by about 25 percent, but the government wanted the hazard pay money back, resulting in debts of more than $100,000 for some bomb squad members. One member committed suicide, allegedly largely because of the stresses he faced with such a large debt. In late June 2016, the Defense Office of Hearings and Appeals agreed to waive the debts after completion of the normal waiver of debt process.

“The pay was incorrectly authorized through no fault of the employees involved,” Air Force Lt. Col. Eric Badger, a Pentagon spokesman, was quoted as saying in a June 2016 Washington Post article. “They could not have known it was paid in error, and we take this matter very seriously.”

Although the hazard duty pay had been previously incorrectly authorized because of an “administrative error made in good faith,” the question still lingers: Why were the bomb squad members held responsible for an error not of their doing and, further, not of their knowledge?

California by the numbers

The Guard story begins with fraudulent mismanagement by some California Guard officials trying to meet enlistment targets. Master Sergeant Toni Jaffe pleaded guilty in 2011 to filing false claims of $15.2 million and was sentenced to 30 months in federal prison. Three Guard officers pleaded guilty to fraud charges and were placed on probation.

David P. Sheldon, Esq., a military defense lawyer and Navy veteran who owns the Law Offices of David. P. Sheldon in Washington, D.C., says many times audits that reveal misappropriated funds are initiated due to an ancillary investigation into fraud. “The California case is typical,” he says.

Major Jamie Davis, U.S. Army, Defense Department Spokesman, explains the associated numbers with the Guard case. “There were no controls in place to prevent the master sergeant from signing these bonus authorizations so she signed off on a lot improperly,” he says. “When she retired, the person who took her place started going through paperwork and realized they had a serious problem, and they started looking at every action this person had her hands on.”

Encompassing reenlistment bonuses, enlistment bonuses and student loan payments, the investigation uncovered about 30,000 actions affecting approximately 13,700 individual soldiers (some soldiers had more than one action associated with them, such as getting an enlistment bonus plus student loan payments). Defense Finance and Accounting Services (DFAS) first started sending letters to affected soldiers in 2012 alerting them of the debts.

About 1,100 received payments they were not entitled to or eligible for. Davis explains some of those involved reenlistment bonuses issued to officers. Officers, however, do not reenlist; they accept a commission. Others may have received bonuses for going into a critical career field, but then deciding against pursuing it. “If that soldier gets out before completing their terms of obligation, the DoD does go back and attempt to recover that money,” Davis says. “Congress expects us to do that.”

The majority of cases, representing about 5,500 soldiers, had only a problem to rectify, rather than the bonus itself being improperly issued. This could be something as simple as missing a signature or that not all of the boxes were checked.

That’s the bucket the majority of individuals involved in the recoupment process fall into. The service member can apply for a waiver to address what needs to be amended. Some of those waivers, though, are taking years to come to some conclusion, and that’s where things can get messy.

Suspending debts

Although the California National Guard had the authority to approve those bonuses, the entity does not have the ability to unilaterally waive the debts. That has to come from above.

House and Senate negotiators reached a compromise on Nov. 30 permitting the Pentagon to forgive debts unless the soldier who received the money “knew or reasonably should have known” that he or she was ineligible for it. Members of the California delegation previously had proposed forgiving debts by all California Guard soldiers if they had fulfilled terms of enlistment contracts and did not commit fraud; the legislative compromise is not that encompassing.

The burden now is on the Pentagon to contact the soldiers and prove each was ineligible; because of this, lawmakers assert the provision likely will result in forgiveness of debts for the majority of the soldiers. The compromise also mandates that if the Pentagon forgives a soldier’s debts, it will have to inform credit agencies to correct any adverse effect on credit scores.

If it happens to you

What do you do if a letter from the DFAS demanding reimbursement arrives in your mailbox? There’s an appeals process for that, which originates in a given state. From there, it goes to the DFAS where it then forwards to the DoD for final disposition.

Davis says with California, the first notices sent between 2012 and 2016 alerted the soldiers there was something wrong with their bonus and they needed to apply for a waiver and get these things corrected. If the service member chose to not correct the errors, then they would have been sent paperwork for collection. If a soldier ignored the process completely, that’s when liens and other actions potentially came into play.

A soldier can set up partial payment or installment plans, but he or she does need to communicate with the finance office to arrange that, says Davis. This is the process in any collections case – not just with California National Guard members.

According to the DFAS website, “to receive favorable consideration for a waiver, it must be determined that collection is against equity and good conscience and not in the United States’ best interest. Generally, these criteria are met when the overpayment was an administrative error and when there is no indication of fraud, misrepresentation, fault or lack of good faith by you, the employee.” A waiver generally is not allowed when a service member receives a significant, unexplained increase in pay or allowances, and, “You should have known, or reasonably should have known, that an incorrect payment has occurred, and you fail to inquire or bring the matter to the appropriate officials’ attention.”

Waivers depend on the facts of each case; economical and financial hardship play no role in a waiver application’s review. Visit dfas.mil for more information about how to submit a debt waiver and to download and complete the necessary form: Waiver/Remission of Indebtedness Application, DD Form 2789. The statutory authority for each branch is listed in Block 1 of the form.

Carefully evaluate your pay

For families concerned about if any bonuses they have received in past years may have been issued inaccurately, Sheldon cautions against digging into it too deeply. “It’s very difficult to ascertain who has the authority to retroactively ‘approve’ payment of what was otherwise a lawful debt,” he says. “There is also the very real risk you could trigger an investigation unwittingly and be required to repay monies that the federal government had no intention or reason to collect.”

Alexandra Hopkin, a military spouse who volunteered at the Navy-Marine Corps Relief Society in Okinawa, Japan, and a candidate for the Certified Financial Planner™ designation, says most service members she worked with had been overpaid for things like OHA or BAH for a family member back home. “They usually came in because they had missed a notation on previous leave and earning statements stating they had been overpaid and the military would be pulling the amount in a lump sum unless they came in to request a payment plan,” she recalls. Hopkin found the finance office generally was helpful with setting up manageable payment plans and helping the service member budget around reduced paychecks.

Hopkin recommends checking every single LES and “do not spend extra money you are not sure you’ve earned. Put it into a separate bank account and go talk to finance. As we’ve seen, the military can come back much later and request their overpayments back. You don’t want to have to go into debt because you’ve already spent the money.”

Conclusions

One positive outcome of the California National Guard situation? “They did start implementing better internal controls,” Major Davis says. “Before, it was one person able to unilaterally sign off on bonuses. As a result, the National Guard Bureau has implemented change where it needs to go through multiple sets of eyes. A lot of it has to be approved by the DoD now instead of just with the National Guard.

“The principle is more important than the cost in terms of not mistreating soldiers,” he continues. “They want to do right by the soldiers. That means treating them fairly and equitably, honoring their service and sacrifice and keeping our word.”